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Taking sides in the trade wars

When the European Union and other major powers lock horns, environmentalists tend to urge Europe to stay strong. In the dispute over aviation emissions, green campaigners demanded that the EU keep to its position in the face of pressure for compromise from the US and China. The same was true during negotiations on climate change. But things were different during this year’s trade dispute between China and the EU over imports of solar panels. As the European Commission was deciding whether or not to adopt sanctions, environmentalists were clearly in favour of tolerance.

Solar panel manufacturers in Europe and the US complained that Chinese manufacturers were dumping their products on the European market. In May 2012, the US imposed punitive tariffs on Chinese solar panels. The EU followed suit in June this year, only to reverse that decision after reaching an agreement with China in July.

Chinese exports of solar panels to the EU were worth €21 billion in 2011, the biggest trade dispute by value in EU history. But environmentalists and much of the solar industry were united in warning that EU sanctions could reduce the size of the solar-panel market and increase costs, just when the industry was on the verge of being able to compete with traditional energy without subsidies.

Not that China is the only target. Last year a group of Indian companies called for the imposition of duties on solar products from the US, China, Malaysia and Taiwan. Similar disputes are looming in the wind turbine sector.

There is increasing concern that these rows are inhibiting the deployment of technology that is crucial to helping the rise of renewable energy. In the run-up to the announcement of punitive tariffs by the EU, Greg Barker, the UK’s minister for climate action, wrote to his EU counterparts saying that tariffs would put “the growth of the low-carbon market across Europe at risk”.

“There is no doubt that these trade spats have led to a climate of retaliation and have inhibited growth,” said Graham Watson, a British Liberal MEP. “We desperately need free and fair trade in clean energy, and we need a framework to prevent and overcome disputes at source, without resorting to litigation.”

Watson and others are calling for a global resolution on trade in solar and wind components, of a similar nature to the semiconductor trade agreement signed between the US and Japan in the 1980s to stop trade disputes inhibiting development in the IT sector. This was followed by the information technology agreement in 1996, signed by 14 governments.

However, others insist that unfair trade practices cannot be ignored. EU ProSun, the industry group whose complaint against Chinese dumping prompted the Commission’s investigation, has criticised the decision to settle the dispute, describing the deal as “contrary in every respect to European law”.

As more trade disputes over green technology flare up, calls for a global mediation body are likely to strengthen.